State-owned gas utility GAIL India today said it has demanded price renegotiation of an LNG import deal with Australia's Gorgon project because of its high price.
New Delhi: State-owned gas utility GAIL India today said it has demanded price renegotiation of an LNG import deal with Australia's Gorgon project because of its high price.
GAIL has asked Petronet LNG Ltd to renegotiate the a 20-year deal to buy 1.44 million tonnes per annum of liquefied natural gas (LNG) at a price equivalent to 14.5 percent of ruling oil rates. GAIL is a promoter of Petronet LNG with 12.5 percent stake.
"Since international markets have changed (since the signing of the deal in August 2009), we feel there is a strong case for renegotiation," GAIL Chairman and Managing Director B C Tripathi told reporters here.
The price agreed with Gorgon translates into USD 14.5 per million British thermal unit price at USD 100 per barrel oil price. After adding shipping cost, 5 percent import duty and the cost of converting liquid gas back into its gaseous state, the Australian gas will cost close to USD 18 at Kochi port.
"We feel the price of Gorgon LNG (which is to be delivered from second half of 2015) should be indexed to current market price," Tripathi said, pointing out that current rates charged by LNG exporters were far less than Australian LNG.
Asked what should be the price, he said: "It should be reasonable price."
The Gorgon LNG price compares to US Henry Hub rate of about USD 4 using which GAIL has recently signed deals to import gas from the US. Qatar, the world's largest LNG producer, sells gas to India at much lower rates.
Several long-term LNG deals, including Russian giant Gazprom's agreement to sell gas into Europe, have been renegotiated in the recent past in view of the slump in benchmark gas prices.
Besides difficulties in marketing of such high priced gas, rupee depreciation against US dollar will make the fuel even more costlier, he said.
Over the last few years, regional gas prices in North America, Europe and Asia have seen record divergence, driven by both supply and demand factors such as the US shale gas boom, the European Financial crisis and the Fukushima nuclear crisis.
GAIL, Indian Oil, Bharat Petroleum and Oil and Natural Gas Corp (ONGC) hold 12.5 percent each in Petronet. Petronet is a private listed company but Oil Secretary is the Chairman of the company.
Petronet is to get Gorgon LNG in second half of 2015, with initial supplies of being about 0.48 million tonnes, ramping up to contracted 1.44 million tonnes in two years.